Valuing Ecosystem Services

What are Mother Nature's life-support services worth? In one sense,
their value is infinite. The Earth's economies would soon collapse without
fertile soil, fresh water, breathable air, and an amenable climate. But
"infinite" too often translates to “zero” in the equations that guide land
use and policy decisions. Practitioners in the young field of ecological
economics believe more concrete numbers are required to help nations avoid
unsustainable economic choices that degrade both their natural resources
and the vital services that healthy natural ecosystems generate.

In one of the first efforts to calculate a global number, a team of
researchers from the United States, Argentina, and the Netherlands has put
an average price tag of US$33 trillion a year on these fundamental
ecosystem services, which are largely taken for granted because they are
free. That is nearly twice the value of the global gross national product
(GNP) of US$18 trillion [1].
(See How
Much Are Nature's Services Worth? and Ecosystems
Services: Free, But Valuable.)

Even those involved in the study admit their number is a first
approximation, but they consider it an essential starting point for
further analysis and debate that will help nations overhaul their economic
and environmental decisionmaking. Not everyone agrees with this approach,
however. Some critics believe the effort to assign prices to ecosystem
services is fundamentally flawed since these services can never be traded
in open commerce, which is how prices of conventional goods and services
are determined [2].
Others believe that, even if such prices can be reasonably calculated,
they cannot reflect the full value of these services, which reaches well
beyond their importance to the world economy. In fact, the study team also
readily acknowledged that there are moral, ethical, and aesthetic reasons
to value and protect nature quite apart from its benefits to humanity [3].

But the reality is that human societies put price tags on nature every
day. Every land use decision involves implicit assumptions about value,
even when no dollar figure is assigned. The problem is that the value of
services provided by the Earth's ecological infrastructure does not fit
into current economic equations, partly because most of the benefits fall
outside the marketplace. Such services are public goods that contribute
immeasurably to human welfare without ever being drawn into the money
economy. For instance, the cycling of essential nutrients like nitrogen
and phosphorus, which is not reflected in any nation's GNP, accounts for
US$17 trillion of the US$33 trillion in annual ecosystem services,
according to the study team's estimate [4].

Indeed, economic indicators such as GNP are increasingly recognized as
flawed measures of both economic progress and sustainability, because they
do not explicitly account for the degradation in ecological services that
industry and commerce cause [5]. For
example, valuing forests only for the marketable timber they produce,
which is as much as the GNP can conveniently measure, ignores the many
indirect costs that society bears when forests are logged: soil erosion,
nutrient loss, increased flooding, declines in fisheries and water
quality, reduced carbon storage capacity, changes in regional temperature
and rainfall, and diminished wildlife habitat and recreational
opportunities.

There have been many attempts in the past few decades to estimate the
value of various separate ecological services. The US$33 trillion
calculation is a synthesis of results from more than 100 published studies
using a variety of different valuation methods. In synthesizing these
results, the research team looked at the value of 17 categories of
services such as waste treatment, pollination, climate regulation, food
production, and recreation in each of 16 types of ecosystems, from coastal
estuaries to tropical forests, rangelands, lakes, and deserts. They
calculated an average dollar value per hectare for each type of service in
each ecosystem, then multiplied that dollar value by the total area each
ecosystem type occupies on the globe [6].

This exercise clearly highlighted areas where much more work is needed.
For some types of ecosystems, such as deserts, tundra, and croplands, so
little is known that the valuation columns under nearly every ecological
service remain blank [7]. That
is one reason the study team considers the US$33 trillion a minimum value;
it will likely increase as more ecological services are studied and the
complex interactions among ecological processes are better understood.
Values are also likely to increase as these services become more degraded
and scarce in the future [8].

Whatever the eventual number, ecological economists consider the global
dollar figure itself less important to policy than to the potential
application of this valuation concept to local and regional land use
decisions. Although the average value of wetland services may not be the
same per hectare in Brazil, Indonesia, or Uganda, the very existence of
the global estimates calculated in the study should broaden the context of
local decisionmaking [9]. In
fact, in a small but growing number of cases around the world, the
benefits of proposed projects are being weighed against the social costs
of lost ecosystem services.

In some parts of the United States, for instance, attention is now
focused on the benefits of protecting natural watersheds to assure safe
and plentiful drinking water supplies, rather than on building expensive
filtration plants to purify water from degraded watersheds. New York City
recently found it could avoid spending US$6 billion to US$8 billion in
constructing new water treatment plants by protecting the upstate
watershed that has traditionally accomplished these purification services
for free. Based on this economic assessment, the city invested US$1.5
billion in buying land around its reservoirs and instituting other
protective measures, actions that will not only keep its water pure at a
bargain price but also enhance recreation, wildlife habitat, and other
ecological benefits [10].

In the traditionally prosperous Hadejia-Jama'are flood plain region in
northern Nigeria, where more than one half of the wetlands have already
been lost to drought and upstream dams, ecosystem valuation has been used
to weigh the costs and benefits of proposals that would divert still more
water away for irrigated agriculture. The net benefits of such a diversion
priced out at US$29 per hectare. Yet, the intact flood plain already
provides US$167 per hectare in benefits to a wider range of local people
engaged in farming, fishing, grazing livestock, or gathering fuelwood and
other wild products -- benefits that would be greatly diminished by the
project. Thus, even without accounting for such services as wildlife
habitat, the wetland is far more valuable to more people in its current
state than diverted for irrigation [11].

Although ecological valuations like these are still rare, further
development of the concept promises to provide a powerful tool for
protection and sustainable use of natural ecosystems and the vital
services they provide.